Allmen, Inc., a manufacturer of heavy machinery, is interested in improving its factory safety record. Jennifer Cybert, Allmen’s controller, has investigated the past four years of industrial accidents, both at Allmen and at other similar factories. She has found that more accidents seem to happen during months with greater hours of overtime worked.

In addition, she thinks that employee safety could be enhanced by a vigorous safety program. To test her hypotheses, she ran a multiple regression on 48 months of data for Allmen for three variables: the cost of industrial accidents, the number of hours of safety training, and the number of hours of overtime worked by production workers.

The following printout was obtained:

Required:
1. Write out the cost equation for Allmen’s industrial accident cost.
2. If Allmen expects to have 280 overtime hours worked next month and expects to spend 200 hours on safety training, what are the anticipated accident costs?
3. Calculate a 99 percent confidence interval for the prediction made in Requirement 2.
4. Is number of overtime hours positively or negatively correlated with accident costs? Are hours of safety training positively or negatively correlated with accident costs?
5. What does R2 mean in this equation? Overall, what is your evaluation of the cost equation that was developed for the cost of industrial accidents?

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Parameter Intercept Number of overtime hours Hours of safety training R = 0.89 S == 250 Observations: 48 t for Ho Standard Error of Estimate Parameter = 0 Pr>t Parameter 2,150 70.00 0.0001 150.00 17 -8.50 3.60 -1.96 0.0050 23.45 0.0250 5.13